CONTINUING DISCLOSURE

LORENZO BOYDMARTIN GHAFOORIDR. DENNIS LEABRITTANY PULLENDR. BILL REBORE

APRIL 25, 2012

MoASBO Spring Conference

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Municipal Securities Rulemaking Board (“MSRB”)

Rulemaking Authority Created and Operates “EMMA” –

Electronic Municipal Market Access MSRB is a Regulator

MSRB

ISSUER BONDHOLDER

EMMA

SEC

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Rule 15c2-12 (the “Rule”)

Continuing Disclosure Obligation added to Rule in July 1995

Requires Contractual Undertaking by Issuer to File Annual Reports and Material Event Notices

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Recent SEC Legislative Changes Decertified the Nationally Recognized

Municipal Securities Information Repository (“NRMSIR”) System – Created EMMA

Elevated Importance – Office of Municipal Securities

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Recent SEC Legislative Changes Expanded Requirements of the Rule

Updated Material Events that Require Filing The Board shall give, or cause to be given, notice of the occurrence of any of the following events

with respect to the Bonds (“Material Events”):

(1) principal and interest payment delinquencies;(2) non-payment related defaults, if material;(3) unscheduled draws on debt service reserves reflecting financial difficulties;(4) unscheduled draws on credit enhancements reflecting financial difficulties;(5) substitution of credit or liquidity providers, or their failure to perform;(6) adverse tax opinions; the issuance by the Service of proposed or final

determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds, or other material events affecting the tax status of the Bonds;

(7) modifications to rights of bondholders, if material;(8) bond calls, if material, and tender offers;(9) defeasances;(10) release, substitution or sale of property securing repayment of the Bonds, if

material;(11) rating changes;(12) bankruptcy, insolvency, receivership or similar event of the Board or the District;(13) the consummation of a merger, consolidation, or acquisition involving the Board

or the District or the sale of all or substantially all of the assets of the Board or the District, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement

relating to any such actions, other than pursuant to its terms, if material; and

(14) appointment of a successor or additional trustee or the change of name of the trustee, if material.

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Recent SEC Legislative Changes

Event Notice for Bonds: Issued on or after December 1, 2010 –

within 10 Days after Occurrence

Issued before December 1, 2010 – filed in a “Timely Manner”

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What Information is Needed?

Can Vary by Bond Issue

Outlined in Continuing Disclosure Section of Official Statement

Typically – FY Audit, Enrollment Data, Indebtedness of the District, History of AV and Tax Rate Information

Gather Information, Prepare and Post to EMMA

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Who Prepares and Submits the Data? Can be:

Issuer (Supt., CFO or Designated Representative)

Dissemination Agent (Paying Agent) Some Bond Counsels

District will still need to Gather Information and Prepare the Document Dissemination Agent and Bond Counsels Post

for a Fee

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When Do I Submit the Data?

File Audit and Operating Data within 180 Days of Fiscal Year End

Material Events – New Issues – 10 Business Days after Occurrence of Event

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How Do I Submit Information to EMMA?

EMMA Registration – https://www.msrb.org/msrb1/control/registration/default.asp

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Continuing Disclosure Submissions

Walkthrough via YouTube:

http://www.youtube.com/user/MSRBNEWS

Questions about Registration or Submissions?

http://dataport.emma.msrb.org

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Critical Challenges for Issuers with 15c2-12

Event Notice Filing Window Within 10 Days – Difficult for Compliance

Written Procedures in Place?

Documents retained over life of Bonds Filing Receipts also must be retained

Are all Continuing Disclosure Covenants Met? Audit plus Operating Data

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Recommendations for Compliance

Adopt Written Disclosure Policies/Procedures Formally or Informally Include Primary and Secondary Contacts

Establish the Disclosure Requirements From Bond Documents

Establish “Effective Date”

Calendar Reminders for Submission

POST-ISSUANCE COMPLIANCE: BECOMING ACCOUNTABLE TO THE IRS

Presented by:GILMORE & BELL, P.C.Sean Flynnsflynn@gilmorebell.com

APRIL 25, 2012

MoASBO Spring Conference

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Post-Issuance Requirements

District must be able to answer (4) questions: (1) How does the District monitor its ongoing

federal tax law requirements? Adopt and implement Written Post-

Issuance Compliance Procedures (2) How does the District account for the

investment of Bond proceeds? Complete Arbitrage Rebate Calculations

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Post-Issuance Requirements

(3) How does the District account for the expenditure of Bond proceeds? Complete a “Final Written Allocation”

(4) How does the District account for the use of Bond financed assets? Complete “Annual Compliance Checklist”

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Who is asking?

Internal Revenue Service Compliance Check Questionnaire Traditional tax audit or examination

Bond Counsel Future refinancings

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Written Compliance Procedures

Purpose: Identify person responsible for compliance Identify proper records the District needs to

maintain to “prove” that it is in compliance Establish process to identify potential non-

compliance and remediate non-compliance

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Written Compliance Procedures

Are written procedures required? Internal Revenue Code IRS Article

http://www.irs.gov/taxexemptbond/article/0,,id=243503,00.html

Form 8038-G IRS Examinations

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Written Compliance Procedures

Written Compliance Procedures should include:

Due diligence review at regular intervals; Identity of person responsible for compliance; Training of responsible official/employee; Retention of adequate records to substantiate

compliance; Procedures reasonably expected to timely

identify noncompliance; and Procedures ensuring that the District will take

steps to timely correct any noncompliance

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Investment of Bond Proceeds

District must pay or “rebate” any excess earnings on the investment of bond related funds

Complete arbitrage rebate calculation Calculation needed? See tax documents Timing:

Within 5 years of the issue date (every 5 years thereafter); and

Final maturity or redemption of the bonds

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Expenditure of Bond Proceeds

District must spend Bond proceeds in a timely manner and on “good costs”

Timely expenditure of Bond proceeds 85% within 3 years; 5 year limit?

Expenditures for “good costs” Capital expenditures (e.g. hard costs –

construct building or purchase equipment) vs Working Capital Expenditures

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Expenditure of Bond proceeds (cont.)

How does the District track the expenditure of Bond proceeds and prove compliance?

Complete “Final Written Allocation” for each Bond issue

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Expenditure of Bond proceeds (cont.)

Final Written Allocation New Money vs Refunding? When should the Final Written Allocation

be completed? Segregated Account vs. Commingled

Account?

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Expenditure of Bond proceeds (cont.)

Final Written Allocation should include the following: Reconciliation of Total Sources to Total Uses for

the Project Sources include bond proceeds (plus

investment earnings) and other District funds Must include District’s accounting records

% of Project financed with the Bond proceeds Date Project is placed-in-service Estimated economic useful life of the Project

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Use of Bond financed property

Code limits the amount of Bond financed property that may be used in a “bad use”

Bad Use? Use by nongovernmental entities in trade or

business Type of contractual arrangements that may result

in “bad use” Sale or lease Management/Operating Agreement Output Contracts Research Agreements Any other arrangement that grant special legal

entitlements to Bond financed property

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Use of Bond financed property (cont.)

How does the District monitor the use of Bond financed property?

Complete Annual Compliance Checklist Influenced by type of property financed

Purpose: Provide contemporaneous records that

District is in compliance; Identify potential non-compliance on a

timely basis; Serve as reminder for other post-

issuance compliance responsibilities

Questions?